ISSUE: THREE CAPITALS FOR ANDHRA PRADESH
WHY IN NEWS?
On Monday, the Andhra Pradesh Assembly passed The Andhra Pradesh Decentralisation and Equal Development of All Regions Bill, 2020, paving the way for three capitals for the state.
Amaravati, where former Chief Minister N Chandrababu Naidu had hoped to build his dream capital, will now be only the legislative capital, while Visakhapatnam will be the executive capital and Kurnool the judicial capital.
Rationale for three capitals
The YSR Congress Party government says it is against building one mega capital while neglecting other parts of the state. “We do not want to develop one area utilising all our available financial resources while other areas suffer due to lack of funds,” Chief Minister Y S Jagan Mohan Reddy told The Indian Express. The government has given several reasons for its “decentralised development” project.
* Historically recommended: According to the government, decentralisation was the central theme in recommendations of all major committees that were set up to suggest a suitable location for the capital of Andhra Pradesh.
Finance and Legislative Affairs Minister B Rajendranath said it had been agreed in the November 16, 1937 Sri Bagh Pact (between leaders of coastal Andhra and Rayalaseema) that two university centres should be established in Waltair (Visakhapatnam) and Anantapur in Rayalaseema, and that the High Court and Metropolis should be in the coastal districts and Rayalaseema respectively.
In December 2010, the Justice B N Srikrishna Committee, set up to look into the demand for a Telangana state, said Rayalaseema and North Coastal Andhra were economically the most backward, and the “concentration of development efforts in Hyderabad is the key reason for demand of separate states”.
In August 2014, the K Sivaramakrishnan Committee appointed to identify locations for the new capital of AP said the state should see decentralised development, and that one mega capital city was not desirable.
G N Rao Committee: A Committee constituted by the YSRCP government under former IAS officer G N Rao, in its December 2019 report, recommended three capitals for balanced growth, and four regional commissionerates along the lines of Karnataka.
* BCG recommendation: The government sought an opinion from the global management consulting firm Boston Consultancy Group, which on January 3, 2020, recommended that Visakhapatnam should be the seat of the Governor, Chief Minister, and all government departments, and a High Court Bench, and have provisions for a Legislative Assembly for use in an emergency; Vijayawada/Amaravati should have the Assembly and a High Court Bench; Kurnool should have the High Court and tribunals.
* High-powered Committee: A high-power Committee appointed by the government to study the recommendations of the G N Rao Committee and the BCG suggested that the state should be demarcated into zones with separate zonal planning and development boards in order to ensure inclusive development, and that infrastructure projects focussed Rayalaseema and North Coastal Andhra should be prioritised.
Major practical problems
The government argues that the Assembly meets only after gaps of several months, and government Ministers, officers, and staff can simply go to Amaravati when required. However, coordinating between seats of legislature and executive in separate cities will be easier said than done, and with the government offering no specifics of a plan, officers and common people alike fear a logistics nightmare.
The distances in Andhra Pradesh are not inconsiderable. Executive capital Visakhapatnam is 700 km from judicial capital Kurnool, and 400 km from legislative capital Amaravati. The Amaravati-Kurnool distance is 370 km. The time and costs of travel will be significant.
The AP Police are headquartered in Mangalagiri, 14 km from Vijayawada, and senior IPS officers who may be required to visit the Secretariat will have to travel 400 km to Visakhapatnam. Likewise, government officers who may have to appear in the High Court will have to travel 700 km to Kurnool, which does not have an airport.
All officers and Ministerial staff who may have to be at hand to brief Ministers when the Assembly is in session, will probably have to stay put in Amaravati, leaving behind their other responsibilities in Visakhapatnam.
There are no plans to construct new buildings in Visakhapatnam. Municipal Administration and Urban Development Minister Botsa Satyanarayana has said there is enough vacant government office space available in the city.
Sources said government buildings on Hill 1 and 2 at Rushikonda IT Special Economic Zone have space to house the Secretariat and offices of the heads of departments. The government is considering allotting plots of government land at subsidised rates to over 14,000 state employees who are likely to move from Vijayawada and Guntur to Visakhapatnam.
ISSUE: SLOWING INDIAN ECONOMY
WHY IN NEWS?
In its latest World Economic Outlook, the International Monetary Fund (IMF) has presented a sobering assessment of the state of the Indian economy. The Fund has not only lowered its expectations of the country’s economic prospects for this year, but has also drastically cut its forecast for growth over the next two years. The IMF now expects India to grow at 4.8 per cent this fiscal year.
ome in India have argued that the country’s current economic slowdown is largely due to sluggish global growth and trade. But, the IMF notes, rightly so, that the downward revision in India’s growth prospects is more due to domestic issues — domestic demand has slowed down more sharply than expected amid stress in the non-banking financial sector, a decline in credit growth and poor growth in rural incomes.
To be sure, global trade growth has been subdued. As per the IMF, growth of world trade volume (goods and services) slowed to a mere 1 per cent in 2019, down from 3.7 per cent the year before. Yet, even as India’s exports have remained almost stagnant over the last five years or so, Bangladesh’s garment exports have surged during this period, as have those of other south-east Asian countries.
Geopolitical tensions in the Middle East could lead to higher crude oil prices resulting in macro-economic instability.
Going by the IMF’s projections, at this rate, growth is likely to average only around 5.7 per cent in the first three years of this government’s tenure.
The upcoming Union budget is an opportune moment for the government to review and course correct. With constrained space for a meaningful fiscal stimulus, and with the limits of monetary easing being tested, the government should clearly articulate how it plans to support the economy during this difficult period.
At the current juncture, the urgency of focusing on deeper reforms to return to a high-growth trajectory cannot be overstated.
ISSUE: CORONA VIRUS
WHY IN NEWS?
The outbreak of a new virus in China has sent shivers through world financial markets, with investors drawing comparisons to the 2003 SARS (Severe Acute Respiratory Syndrome) outbreak in order to assess its potential economic impact.
Global economic and financial market impact
A 2017 paper by economists Victoria Fan, Dean Jamison and Lawrence Summers estimated that the expected annual losses from pandemic risk to be about $500 billion — or 0.6% of global income — per year, accounting for both lost income and the intrinsic cost of elevated mortality.
Another 2016 study by the Commission on a Global Health Risk Framework for the Future estimated that pandemic disease events would cost the global economy over $6 trillion in the 21st century — over $60 billion per year.However, price action in markets indicates that the impacts of such outbreaks are limited.
After Chinese authorities reported the outbreak of SARS to the World Health Organization (WHO) in 2003, the MSCI China index of shares decoupled from its global peers – but made up the lost ground in only six months.
Economic cost of SARS outbreak 2003
A paper by Jong-Wha Lee and Warwick McKibbin estimates the global economic loss due at SARS at $40 billion in 2003.
A May 2006 economic briefing by the International Air Transport Association (IATA) estimated that world gross domestic product suffered a 0.1% hit due to the outbreak.
Market winners and losers
Despite the disruption to the wider economy, virus outbreaks have tended to benefit pharmaceutical stocks, while tourism and travel-related stocks — hotels, airlines and luxury and consumer goods — tend to get punished. During the SARS outbreak, retail sales figures in China showed a marked drop-off as consumer spending took a hit.
On Tuesday, Chinese drugmakers Jiangsu Bioperfectus Technologies Co Ltd, Shandong Lukang Pharmaceutical Co Ltd, and Jiangsu Hengrui Medicine Co Ltd were among those outperforming the wider market. Facemask manufacturers Tianjin Teda Co Ltd and Shanghai Dragon Corp also outperformed.
Shares of long-haul flight operators Air France, Lufthansa and British Airways-owner IAG retreated, as news of the contagion raised concerns over disruptions to travel during a coming Chinese holiday.